Discussion:Rental Loss - Form 8582 Not Required??
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Discussion Forum Index --> Tax Questions --> Rental Loss - Form 8582 Not Required??
| 12 October 2007 | |
| I'm finalizing a tax return with a huge rental loss, and want an opinion. Client has 10 rental properties (Sch.E - active participation) with a current year loss of $115k, and carryover loss of $220K. Client sold one property with an adjusted basis of $0 (cost $100k - accumulated depreciation $100k) for $350k. My tax software (Proseries) is telling me that Form 8582 is not required because the passive loss is NOT limited. As a result, I'm able to deduct a significant amount as rental loss ($200k) which included prior year carryover losses as well.
I'm a sole practitioner, and have the disadvantage of not having someone review my work. Please advise. If more data is needed, I'll be happy to provide. Thanks! | |
| 12 October 2007 | |
| See Exceptions to Who Must File. Ostensibly you meet one. | |
| 12 October 2007 | |
| you also have to determine whether he aggregated his rental activities to meet the active participation rule, in which case oh boy. | |
Death&Taxes (talk|edits) said: | 12 October 2007 |
| I think he is talking about Sec. 469(i) where attaining active participation is not at the same level as that for a real estate professional. One can actively participate one year and not for the next on certain properties. If that is true, his passive income would far exceed his losses and he would not need to file Form 8582......then again, maybe my comprehension is not what it used to be. Note too that income at the level he speaks would free up passive losses in activites where he didn't actively participate. | |
Death&Taxes (talk|edits) said: | 12 October 2007 |
| No harm, no foul!!!! Now he is giving it back at 25% instead of 15% Or perhaps it is one of those condos that someone was writing about the other date where land was something like .00075 percent of the cost. | |
| 12 October 2007 | |
| Kevin - the sale was a condo with no land value. You guys have me confused now. My client is NOT a real estate professional. He is an active landlord. Even though I felt I ostensibly met the first exception to file, my confusion is whether all losses (including prior years) would be fully allowed in 2006? | |
Death&Taxes (talk|edits) said: | 12 October 2007 |
| I was trying to say 'yes'....the passive income frees up the unused passive losses. | |
| 12 October 2007 | |
| Thanks D&T. It's making much more sense NOW that you have explained. | |
| 12 October 2007 | |
| DT, shouldn't we add "up to the maximum of (the net gain from the passive activities including capital and ordinary) (the prior suspended losses from this one property/activity)?? | |
Death&Taxes (talk|edits) said: | 12 October 2007 |
| I should have said that, but I know his software and it does take that into consideration. SG had the right idea not to trust his software.
I am one of the fortunate few anymore who did passive loss worksheets by hand from 1987-91. That was fun, especially with the transition period when regular tax allowed 65%-40%-20%-10% while AMT allowed no passive loss. | |
| 13 October 2007 | |
| D&T, you alluded to one of my greatest weaknesses (which Dennis also frequently talks about). Since I started working when computer software was readily available, it's very tempting to rely on the software calculations and ignore doing things by hand. But when you do this, it's hard to grasp the flow of information from one form to another, and understand how calculations are being done. (It also doesn't help that math was my worst subject). | |
Death&Taxes (talk|edits) said: | 13 October 2007 |
| Brother Kevin will preach a sermon on this! I can never get over the Form 1116 computation; it is a form I rarely did when we used pens and paper. I wonder too how I would ever manage Schedule D today.....then every so often I see an old return I did where I scribbbled the Schedule A excess AGI computation near that line!
If I were evaluating software today, I think I would want to see something like what Proseries gives using 'right mouse' on certain numbers.....there is a cross reference telling where the number came from, or even better a link....this enables us to trace the computation. Only problem here is that after March 15th you don't have that time, or at least with my one person practice, I don't. | |
